News trading is one of the trading strategies that is not the easiest to understand. The essence of such trading is to enter into a transaction during the publication of important news and profit from the growing volatility that can form during this time. In this case, we are not talking about news from TV or the Internet, designed for the average person, which, by definition, cannot be fresh. And now more about all the aspects of how to trade on the news.
A powerful source of price fluctuations in world markets are:
- political and economic news;
- rumors about falling interest rates of central banks;
- litigation between corporations and governments;
- jumps in inflation;
- Crypto News;
- growth of unemployment and other events taking place in the world.
Such news causes a strong resonance in the currency markets. Although in the last ten years, absolutely all financial markets have been characterized by instability. Previously, the “buy and hold” tactics of investors paid off very well - long-term investors rarely, but aptly, allowed themselves to trade on the news. Daytraders at this time on the same strategy received profit several times a day. Therefore, regardless of who you want to be on the stock exchange, it makes sense to master the methods of trading on the news.
HOW TO GET PROFIT ON THE NEWS
There are only two advisors for trading on the news. These are two calendars - financial and economic. They are needed to find events that can significantly affect any particular market. Each event in the calendar is assigned a degree of importance - the higher it is, the higher the volatility can be expected after the release of the news. As a result of the publication, quotes can both grow and decrease. And in order to buy and sell assets at a profit, one must have fundamental knowledge of economics and an approximate understanding of the expected unemployment rate, GDP growth, refinancing rates.
The key skills of a trader when trading on the news:
- be able to analyze the economic and political situation;
- anticipate future news and the scale of their influence;
- predict their actions during the release of news from all events to find the one that will have the maximum impact on the market. The more significant it turns out to be, the more targeted it will “hit” the necessary segment, the more volatile assets will become after the news is published. The trick is to keep track of such news in advance, to know when it will appear and what papers it will have an impact on. This will allow you to place pending orders in advance to open positions.
- By focusing on the news, a trader can sell facts and buy rumors. To do this, you need to have some experience and understanding of how prices are formed before the publication of forecasts and after the publication of real numbers.
NEWS FOR TRADING ON THE EXCHANGE - FOR WHAT EVENTS AND INDICATORS SHOULD BE FOLLOWED:
- meetings of the central bank and its decisions on monetary policy - they are reacted by lowering and raising the rate of exchange.
- Quarterly reports on GDP growth. In case of discrepancies with the forecast, impulses may appear and volatility expands. But usually the results of the publication are immediately included in the price. An important detail is that preliminary data on GDP growth are published in the next quarter after the reporting period.
- Experienced market participants rely on other previously published figures, so they roughly understand the overall picture.
- Indices of consumer prices and inflation. Indices of business activity in manufacturing and services. In the UK, a separate index is published in the construction industry and real estate.
- Employment indicators, the unemployment rate - if the figures for them grow, then the price of assets falls. And vice versa. This is the necessary minimum of data from important news for trading.